Pakistan set to elect new prime minister Tuesday

ISLAMABAD, July 30 (Reuters) - Pakistan's lawmakers will elect a new prime minister on Tuesday to replace ousted leader Nawaz Sharif, with ruling party stalwart Shahid Khaqan Abbasi expected to become interim leader until Sharif's own brother is eligible.

The confirmation from parliament came after Pakistani President Mamnoon Hussain convened a special session after Sharif decided to put forward his ally Abbasi as interim leader and named his brother Shahbaz, 65, as long-term successor.

Sharif's Pakistan Muslim League-Nawaz (PML-N) party holds a majority with 188 seats in the 342-member parliament, so it should be able to swiftly install its choice, barring any defections from its own ranks.

A quick handover could ease the political upheaval sparked by a Supreme Court decision on Friday to disqualify Sharif for not declaring a source of income. The court also ordered a criminal investigation into him and his family.

Abbasi on Sunday vowed to continue Sharif's work.

"I hope that God will help me in furthering Nawaz Sharif's policies," Abbasi told reporters in Islamabad, adding to speculation that Sharif will continue to run the show behind the scenes.

The turmoil and the premature end to Sharif's third stint in power has also raised questions about Pakistan's democracy. No prime minister has completed a full term in power since the country gained independence from British colonial rule in 1947.

"We wanted to make sure there is a smooth transfer of power and no constitutional crisis," said Miftah Ismail, a senior PML-N official and Sharif ally.

SUCCESSION PLAN

On Sunday evening, thousands of supporters of opposition politician Imran Khan held a celebration rally in Islamabad, waving flags and cheering Sharif's ouster.

Khan, who spearheaded a campaign for the Supreme Court case that removed Sharif, has said he expects to win the next general elections in 2018.

Meanwhile, Sharif loyalists incensed by his ouster cheered his arrival in the hill town of Murree.

Sharif has lashed out against the court's decision and opponents who used the Supreme Court to topple him. He has vowed his party would continue to focus on development, touting a faster-growing economy as proof of his success.

"Wheel of development is moving and may God keep it rolling and may it never stop," he told members of PML-N on Saturday night.

On Sharif's arrival, supporters chanted: "The Lion is here".

But his foes slammed PML-N's plans as dynastic and undemocratic. Khan called it a form of "monarchy".

Sharif said the plan is for former petroleum minister Abbasi to stay in power for less than two months until Shahbaz, who is the chief minister of the vast Punjab province, wins a by-election to the national assembly and becomes eligible to be prime minister.

Abbasi and Shahbaz will have to work fast to tackle Pakistan's worsening ties with the United States, frayed relations with India, and persistent attacks by Islamist militants, including the Pakistani Taliban and Islamic State.

They will also need to boost economic growth above the current rate of 5.3 percent to find employment for millions of young people entering the job market every year in a nation of nearly 200 million people.

Economists say this will prove tricky, with the current account deficit is ballooning and an overvalued currency is hurting exports.

COURT RULING

Sharif, whose PML-N party won elections in 2013, said he was shocked by Friday's Supreme Court ruling disqualifying him from office over unreported income from a company owned by his son in Dubai. Sharif said the monthly salary - equivalent to $2,722 - was nominal and he never actually received any of it.

The Supreme Court employed little-used Article 62 of the Constitution, which calls for the dismissal of any lawmaker deemed dishonest, to dismiss Sharif. His allies believe the verdict smacks of judicial overreach. Others say privately elements of the military had a hand in the process.

"People of Pakistan haven't accepted the decision," Abbasi said.

The army has not commented on Sharif's departure, or on allegations they were involved. It has also dismissed claims in the past that they were behind the Supreme Court's push.

Sharif's two previous stints in power were also cut short, the second ending in a military coup led by General Pervez Musharraf in 1999.

Shahbaz Sharif, who has been in charge of Punjab since 2008, has better relations with the military than his brother. He has built a reputation as a competent administrator focused on building infrastructure. (Additional reporting by Asif Shahzad, editing by Larry King)